Charlie Bridge Street Pty Ltd ('Charlie Bridge') has appealed, on a question of law, under s 80 of the Civil and Administrative Tribunal Act 2013 (NSW), from a decision of the Tribunal at first instance. That decision relates to a claim by the landlords, Raffaele and Laura Mary Petrazzuolo ('the Petrazzuolos') and a claim by the tenant, Charlie Bridge, under a retail lease.
[2]
Background
The facts which gave rise to the dispute between the parties are set out conveniently in the Tribunal's reasons at first instance:
1. Charlie Bridge Street Pty Limited (the Applicant) entered into a lease of Shop 1 at 324-342 George Street, Sydney from Rafaelle and Laura Petrazzuolo (the Respondents).
2. The lease commenced on 1 June 2016 for five years with an option to renew for a further five years and is registered as no. AK734559 (the Lease). The Applicant was granted a rent discount of 50% for the first 12 months of the term.
3. The Applicant operated a café from the premises (the business) and expended a significant amount of money fitting out the premises with its particular fitout and branding (the fitout). The Applicant provided a bank guarantee for $27,500.00 to secure its performance under the Lease.
4. The Applicant also entered into three rental agreements with Silver Chef Rentals for the provision of equipment to be used in the business (the rental equipment).
5. The Applicant regularly did not pay the rent on the due date, being the first day of the month, although did generally pay within the 14 day grace period under the Lease.
6. On or about 8 June 2017, the director of the Applicant, Mr Saxon Mark Griese, wrote to the Respondents and requested that the 50% discount that had been granted for the first 12 months continue for a further two months, namely for June and July 2017, and for the discounted amount to the 'amortised back at a later stage in the lease' due to difficulties in trading.
7. Mr Raffaele Petrazzuolo on behalf of the Respondents confirmed by email their agreement to this request. The Applicant then paid the reduced rent for the months of June and July 2017.
8. On or about 3 September 2017, the Respondents issued a tax invoice for the September rent plus the rent that had been amortised over June and July.
9. On about or 6 September 2017, Mr Griese contacted the Respondents and queried the rent invoice, in particular that the amortised rent was included in the tax invoice, as Mr Griese was of the view that the agreement was to the effect that the amortised rent would be paid at a later stage.
10. Thereafter, discussion took place between the parties, mainly by email, regarding the payment of rent and the quantum but no agreement was reached as to the amount to be paid.
11. On 13 September 2017, the Respondents sent an email to the Applicant stating:
I am writing to inform you that you are now in breach of the lease. As at 3.45 today rent is still unpaid.
12. The Applicant did not pay the September rent. Consequently, the Respondents arranged for the locks to the premises to be changed and retook possession of the premises on 17 September 2017.
13. On 18 September 2017, the Applicant paid all arrears of rent to the Respondents and sought the Respondents' permission to re‑enter the premises to continue to operate the business.
14. The Respondents, on a without prejudice basis, advised that the Applicant could re‑enter the premises but only on certain conditions, one of which was that the amount of the bank guarantee would increase. This offer to re‑enter was rejected by the Applicant.
15. Subsequently, after further discussions between the parties, the Applicant lodged a Retail Leases Application seeking damages in the amount of $300,000.00 and relief against forfeiture of the Lease.
16. Shortly thereafter, the Applicant lodged a second Retail Leases Application relating to the purported sale by the Respondents of the business, fitout and rental equipment. At the first directions hearing the Respondents advised the Tribunal and the Applicant that they were no longer seeking to sell these assets and the second Retail Lease Application was withdrawn.
17. On or about 12 January 2018, the Respondents in turn lodged a Retail Leases Application claiming damages for loss and expenses for breach of the Lease by the Applicant.
18. On 25 January 2018, the parties attended a mediation facilitated by the Office of the NSW Small Business Commissioner. The parties failed to reach a settlement at that mediation.
19. On or about March 2018, the Respondents entered into a lease of the premises with a new tenant.
20. On or about 30 April 2018, the Applicant amended the second Retail Leases Application to no longer seek relief against forfeiture and instead claimed damages for wrongful termination of the Lease, including the return of the fitout and rental equipment or, alternatively, a sum for further damages for loss due to the non‑return of such equipment.
The case turned on the question of whether the lessor had lawfully entered the premises and taken possession of them. The Petrazzuolos argued that they were entitled to enter and take possession of the premises, without written notice, under clause 12.2 of the lease. Alternatively, they argued that their email of 13 September 2017 constituted constructive written notice. They claimed damages. Charlie Bridge argued that the combined effect of clause 12.2 of the lease and s 129 of the Conveyancing Act 1919 (NSW) is that, in circumstances such as these, where there has been non-payment of rent which was due under a retail lease, a tenant is entitled to at least 14 days written notice of a landlords intention to end the lease and re-enter the premises. Charlie Bridge argued that there had been no such notice, and that it was therefore entitled to damages.
The retail lease was in the form published by the Law Society of New South Wales. The retail lease provided, in clause 5.5.1, clause12.2 and clause 12.5.1 as follows:
5.1 The lessee must pay to the lessor or as the lessor directs -
5.1.1 the rent stated in item 13A in the schedule;
…
12.2 The lessor can enter and take possession of the property or demand possession of the property if -
12.2.1 the lessee has repudiated this lease; or
12.2.2 rent or any other money due under this lease is 14 days overdue for payment; or
12.2.3 the lessee has failed to comply with a lessor's notice under section 129 of the Conveyancing Act 1919; or
12.2.4 the lessee has not complied with any term of this lease where a lessor's notice is not required under section 129 of the Conveyancing Act 1919 and the lessor has given at least 14 days written notice of the lessor's intention to end this lease.
12.5 Essential terms of this lease include -
12.5.1 the obligation to pay rent not later than14 days after the due date for payment of each periodic instalment (and this obligation stays essential even if the lessor, from time to time, accepted late payment);
…
The Conveyancing Act 1919 provides, in s 129:
129 Restrictions on and relief against forfeiture of lease
(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition, or agreement (express or implied) in the lease, shall not be enforceable by action or otherwise unless and until the lessor serves on the lessee a notice:
(a) specifying the particular breach complained of, and
(b) if the breach is capable of remedy, requiring the lessee to remedy the breach, and
(c) in case the lessor claims compensation in money for the breach, requiring the lessee to pay the same,
and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and where compensation in money is required to pay reasonable compensation to the satisfaction of the lessor for the breach.
(2) Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture, or has re-entered without action the lessee may personally bring a suit and apply to the Court for relief; and the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, may grant or refuse relief, as it thinks fit; and in case of relief may grant the same on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court in the circumstances of each case thinks fit.
(2A) If such right of re-entry or forfeiture arises under a lease for a term of ten years or upwards by reason of a breach of a covenant by the lessee that the lessee will not make alterations in the demised premises without the consent of the lessor, and if it shall be proved to the satisfaction of the Court that the alterations made or proposed to be made have been or may be made without substantial injury to the lessor the Court may grant relief on such terms as the Court may think proper.
(3) The provisions of subsection (1) shall not extend to a covenant or condition or agreement against doing, committing, or suffering anything whereby or by means whereof either alone or with other circumstances any licence under the Liquor Act 2007 is or may be endangered, or is or may be liable to lapse or be suspended, cancelled or refused.
(4) This section applies although the proviso or stipulation under which the right of re-entry or forfeiture accrues is inserted in the lease in pursuance of the directions of any Act of Parliament.
(5) For the purposes of this section a lease limited to continue as long only as the lessee abstains from committing a breach of covenant shall be and take effect as a lease to continue for any longer term for which it could subsist, but determinable by a proviso for re-entry on such a breach.
(6) This section does not extend:
(a) to any Crown lease or to any lease granted by an owner under section 69 of the Mining Act 1906, or to any lease or tenancy for a term of one year or less, or
(b) to a covenant, condition, or agreement against the assigning, under-letting, parting with the possession or disposing of the land leased where the breach occurred before the commencement of the Conveyancing (Amendment) Act 1930, or
(c) to a condition for forfeiture on the taking in execution of the lessee's interest in any lease of:
(i) agricultural or pastoral land,
(ii) mines or minerals,
(iii) a house used or intended to be used as licensed premises under the Liquor Act 2007,
(iv) a house let as a dwelling-house, with the use of any furniture, books, works of art, or other chattels not being in the nature of fixtures,
(v) any property with respect to which the personal qualifications of the tenant are of importance for the preservation of the value or character of the property, or on the ground of neighbourhood to the lessor or to any person holding under the lessor,
(d) in case of a mining lease to a covenant, condition, or agreement for allowing the lessor to have access to or inspect books, accounts, records, weighing-machines, or other things, or to enter or inspect the mine or the workings thereof,
(e) to a condition for forfeiture on the taking in execution of the lessee's interest in any lease (other than a lease mentioned in paragraph (c)) after the expiration of one year from the date of the taking in execution, provided the lessee's interest be not sold within such one year: But if the lessee's interest be sold within such one year this section shall extend and be applicable to such condition for forfeiture.
(7) (Repealed)
(8) This section shall not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent.
(9) The notice mentioned in this section shall be in the form set out in the Sixth Schedule or to a similar effect.
(10) This section applies to leases made either before or after the commencement of this Act, and shall have effect notwithstanding any stipulation to the contrary.
Charlie Bridge's case relied on the decision of Santow J in MI Design Pty Ltd v Dunecar Pty Ltd & 1 Ors [2000] NSWSC 996 ('the MI Design case'). In that case, MI Design Pty Ltd ('MI Design') was the tenant of a hotel, which it leased from Dunecar Pty Ltd ('Dunecar'). At a point in time during the term of the lease, Dunecar retook possession of the hotel, without notice to MI Design. The lease between Dunecar and MI Design included clause 12.2 in the same terms as clause 12.2 in the lease between the parties to the present dispute. There was a variation to the lease in the MI Design case, but it did not affect the outcome. The Conveyancing Act 1919 was applicable. The grounds for re-entry relied upon by Dunecar were several breaches of the Liquor Act 1982 (NSW) (repealed) by MI Design, which were admitted by MI Design, and unpaid rent.
In relation to the question of whether Dunecar was entitled to re-enter the hotel without written notice, Santow J said:
22. Thus it can be seen that subject to any effective variation to the lease being made, there is a mandatory fourteen days' notice, either statutory under s129 if applicable (with its concomitant obligatory opportunity to the tenant to remedy, if capable of remedy, or pay claimed compensation) or else contractual. The original lease makes it clear that such notice is an essential pre-condition for taking possession of the property, irrespective of the nature of the breach (apart from the tenant repudiating the lease as provided in 12.2.1).
…
26. …I do not consider that either the original lease or the Variation or indeed any of the associated documentation obviates the requirement of a fourteen day notice to the lessee as a condition precedent to re-entry, whatever the breach. This applies equally to breaches taken outside s 129(1) by s 129(3), as the contract is wider than the statute. It follows that the lessor's purported re-entry was unlawful for lack of prior notice and not in accordance with the lessor's obligations under the lease and its accompanying documents and the Variation.
…
28. The breaches relied upon comprised firstly unpaid rent which, under the original lease or the Variation, would have required prior notice if that were the sole basis for the lessor's re-entry….
After a discussion of the breaches under the Liquor Act 1982, Santow J said:
Conclusion
53. Section 129(3) does not apply in the circumstances to preclude the application of s 129(1) of the Conveyancing Act 1919, with the consequence that the Plaintiff is entitled to the statutory protection afforded by that section. It operates additionally to, and not so as to be read down by, any protection afforded to the lessee by the lease itself or the lease as subject to the Variation. In effect the tenant has two shields, the statutory notice shield under s 129(1), unless taken away by s 129(3) (I conclude it was not) and any further shield conferred by the lease documentation (as I conclude also applied).
Summing up in relation to the lessor's re-entry
54. The lessor's re-entry was invalid by reason of failure to comply with an essential integer of the landlord's right to enter and take possession, or demand possession, of the relevant property. That essential integer or condition is imposed both by the lease with or without the Variation, and by s 129(1) of the Conveyancing Act 1919. As the notice required both by the lease read with or without the Variation and s 129(1) of the Conveyancing Act was never given to the tenant, the entry was unlawful and invalid.
[3]
The Tribunal's Decision at first instance
The Tribunal said, in relation to the point in issue:
46. To resolve the issue as to whether notice was required before the Respondents could re‑enter and re‑take possession of the premises, the Tribunal will look critically at the decision of Santow J in MI Design. The Tribunal notes the reference to MI Design in Lang's Commercial Leasing in Australia published by CCH which states as follows:
The lessee sought restoration into possession and relief against forfeiture claiming that the lessor's re‑entry was invalid due to no proper notice of breach. The Court held that the re‑entry for the non‑payment of rent was defective for want of proper notice due to the notice requirements contained in the lease. Defective re‑entry will expose the lessor to a substantial claim for damages from the lessee and may have professional liability ramifications for the lessor's solicitor.
47. On a first reading of the decision of Santow J in MI Design, I find that the case note referred to in the paragraph above accords with the submissions from the Applicant that Santow J made it very clear that he has read clause 12.2.4 of the lease to mean that whilst subsection 129(8) would normally prevail in relation to a breach by a lessee for non-payment of rent and thereby not require a lessor to give any notice (rent being an essential term of the lease along the lines as stated in Shevill's case referred to above), the terms of clause 12.2.4 require the Respondents, as lessor, to give at least 14 days' written notice of its intention to end the Lease.
48. On a critical examination of the whole of section 129 of the Conveyancing Act 1919, I note firstly subsection (8) provides that the law relating to re-entry or forfeiture of the lease in case of non-payment of rent is not to be affected. Consequently, as the common law recognises, no notice is necessary in respect of re-entry or forfeiture of the lease for any default for non-payment of rent. Significantly, section 129(3) also seeks to preserve the position that no notice is required in connection with certain breaches under the Liquor Act 2007.
49. Santow J in MI Design looked at the relevant breaches by the lessee and came to a view, based on expert evidence, that such breaches may not have endangered or made the licence liable to be lapsed or suspended. Therefore the provisions of section 129(3) did not apply and consequently the notice provisions under section 129(1) became necessary which accords with the head note of the case as cited in paragraph 46 above.
50. Santow J in MI Design stated at [43]:
Provided subsection (3) does not preclude the application of s129 (1), the effect of the statute is that the lessor's right of re‑entry on breach of covenant is not capable of being exercised against the lessee until the notice and other conditions of subsection (1) had been complied with, that is so irrespective of the terms of the lease (s129 (10)).
51. Consequently, Santow J focused on sub-section 129(10) which says that the provisions of section 129 prevail notwithstanding any stipulation to the contrary.
52. Young J in CAC Pty Ltd v Diamond Hill International Pty Ltd (1996) 7 BPR 14, 754 held at [5] in connection with a clause in the lease that read:
6.1 Your obligation is to pay money and your obligation is to insure, repair, to use the shop for the permitted use and to obtain our consent to a transfer or other dealing or essential terms of this lease. We may terminate this lease if you do not comply with an essential term.
In any event cl 6.1 could not displace the rights that are given under s129 of the Conveyancing Act because of s129 (10).
53. However, in this case there are no issues with respect to breaches of the Liquor Act 2007. The only breach is the non-payment of rent by the Applicant.
54. In my view, it is clear from the provisions of clause 12.2.4 of the Lease that it is an attempt to have the Respondents, as lessor, provide a notice of intention to re‑enter where in circumstances it ought not otherwise be required to do so, such as re‑entering and forfeiting the lease in the case of non‑payment of rent.
55. In these circumstances, I would have thought that in fact clause 12.2.4 is a clause that does not comply with sub‑section 129(10) of the Conveyancing Act 1919 in that the effect of clause 12.2.4, as determined by Santow J in MI Design and Young J in CAC, is to circumvent the provisions of sub‑section 129(8) relating to the seeking of relief in respect of breaches for non‑payment of rent where notice is not required.
56. Further, I note the provisions of clause 14.3 of the Lease, which provides that the Lease is subject to any legislation that cannot be excluded. Sub‑section 129(8) of the Conveyancing Act 1919 cannot be excluded per sub‑section 129(10). Therefore, the provisions of clause 12.2.4 are rendered inoperable. In these circumstances therefore the Respondents were entitled to re‑enter and re‑take possession of the premises without further notice to the Applicant.
The Tribunal at first instance made the following orders:
1. Clause 12.2.4 of the Law Society Commercial Lease is contrary to s 129(10) of the Conveyancing Act 1919.
2. The applicant's Retail Lease claim (Com 17/52559) is dismissed.
3. Charlie Bridge Street Pty Ltd is to pay Rafaelle Petrazzuolo and Laura Mary Petrazzuolo the sum of $50,294.20 within 14 days of publication of these reasons.
4. Charlie Bridge Street is to pay Rafaelle Petrazzuolo and Laura Mary Petrazzuolo's costs as agreed or as assessed in accordance with the applicable costs assessment legislation.
Charlie Bridge's grounds of appeal are as follows:
In the first limb, the appellant submits that the Tribunal made an error of law in making order 1 of the decision. The relevant paragraphs of the decision in this regards [sic] are 45 to 47, inclusive.
The precedent set in the decision of Santow J in the MI Design case should have been applied and followed in this case. The lease provisions set out in the cases relied upon by the respondent in this regard are not the same as that in the lease in question, whereas it is identical in the MI Design case.
It follows from this that the appellant should be compensated also for its fitout which was removed and destroyed by the new tenant with the approval of the respondent.
The Petrazzuolos filed a reply to the grounds of appeal, which said:
The Respondents support the dismissal of the Appellant's Retail Lease claim for reasons other than as set out in Order 1 of the Tribunal's Orders dated 1 February 2019.
The Respondents submit that clause 12.2.2 of the Lease permits the termination and repossession of premises by the Respondents (as lessors) if the rent payable by the Appellant (as lessee) was more than 14 days overdue without the need for any separate notice under clause 12.2.4 of the Lease. Further, the Respondents submit the obligation to pay rent not later than 14 days after the due date is an essential term pursuant to clause 12.5 of the Lease and thus entitles the Respondents to terminate the Lease and retake possession in accordance with clauses 12.1.2 and 12.2.2.
…
Reply to Appellant's Grounds of Appeal
1. There is no error of law in Order 1, so the order should be affirmed by the Appeal Panel. The Tribunal gave detailed reasons in paragraphs 37-59.
2. The Tribunal gave detailed reasons in paragraphs 45-56 as to why the decision in MI Design was distinguishable to this case [sic] and why the Appellant's original claim was dismissed.
3. There was no error by the Tribunal in regard to the claim for fitout. The Tribunal gave detailed reasons in paragraphs 60-63.
[4]
Jurisdiction
At all relevant times, the Petrazzuolos have been resident in Melbourne, Victoria. Charlie Bridge is a company registered in Sydney, New South Wales. The sole director of Charlie Bridge, Saxon Griese, has provided affidavit evidence in this matter.
The High Court determined, in Burns v Corbett [2018] HCA 15, that the Commonwealth Constitution precludes the Parliament of a State from conferring jurisdiction in respect of a matter between residents of different States within s 75(iv) of the Constitution on a tribunal which is not one of the 'courts of the States' referred to in s 77 of the Constitution. The High Court said, at paragraph 2 of its judgment:
Considerations of constitutional text, structure and purpose compel the conclusion that a State law that purports to confer jurisdiction with respect to any of the matters listed in ss 75 and 76 of the Constitution on a tribunal that is not one of the courts of the States is inconsistent with Ch III of the Constitution, and is, therefore, invalid.
In Burns v Corbett, it was agreed between the parties that this Tribunal was not a Court. That issue was subsequently argued in Attorney-General for New South Wales v Gatsby [2018] NSWCA 254, and the Court of Appeal determined that this Tribunal is not one of the 'courts of the States' referred to in s 77 of the Constitution.
Had the present dispute occurred between natural persons, there would have been no doubt that the Tribunal would not have had jurisdiction to determine the dispute. However, Charlie Bridge is a company.
The parties agreed that the Tribunal has jurisdiction in this matter. The decision of the High Court in Australasian Temperance and General Mutual Life Assurance Society Ltd v Howe (1922) 31 CLR 290 was cited. In that case, by a majority, the High Court determined that companies were not included in the words 'residents' and 'resident' in s. 75(iv) of the Constitution. Those words, it was determined, in context, referred only to natural persons. Mr Nicholl, on behalf of the respondent, also drew our attention to the decision in Shuttleworth v Pearson [2018] WASAT 112, a decision of the State Administrative Tribunal of Western Australia, in which the High Court's decision in Australasian Temperance and General Mutual Life Assurance Society Ltd v Howe is discussed in detail and followed.
We are satisfied that we have jurisdiction in this matter because Charlie Bridge is a company and not, therefore, a resident of New South Wales within the meaning of s 75(iv) of the Constitution. This matter is not, therefore, a dispute between residents of different States.
[5]
Were the Petrazzuolos required to give written notice?
The rent which was unpaid when the Petrazzuolos re-entered the premises on 17 September 2017 had fallen due on 1 September 2017. The overdue rent was the sole basis for re-entry.
A lease is a type of contract (see Willmott Growers Inc v Willmott Forests Limited (Receivers and Managers Appointed) (In liquidation) [2013] HCA 51). At common law, a breach of an essential term of a lease, such as the term requiring the payment of rent, entitled the party who was not in breach to terminate the lease, without notice (see Walsh Investments Pty Ltd v SCK Properties Pty Ltd [2016] QCA 258 and Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17 at 55).
As set out above, the Conveyancing Act 1919, in s 129(8) says;
This section shall not affect the law relating to re-entry or forfeiture or relief in the case of non-payment of rent.
The effect of s 129(8) is that, although s 129 generally applies to the lease between the parties in this matter (see s 129(10)), the requirement for the giving of notice that s 129 provides for is not applicable where the breach in question is the non-payment of rent. In Batiste & Ors v Lenin [2002] NSWCA 316, Sheller JA, with whom Giles and Santow JA agreed, said, in discussing the judgment at first instance in that case:
58. …It was accepted on behalf of Mr Lenin that s 129(1) of the Conveyancing Act 1919 provides that the right of re-entry for breaches of covenant other than the non-payment of rent is not enforceable by action, except where the lessor serves on the lessee a notice in the form set out in the sixth schedule or to similar effect and the lessee fails within a reasonable time thereafter to remedy the breach or pay reasonable compensation, as the case may be. No such notices were given. Subsection (8) provides that that section does not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent.
…
…
60. …In two cases - Hayes v Gunbola Pty Ltd (1986) 4 BPR 97263 and Dalla Costa v Beydoun (1990) 5 BPR 11,379 - Young J agreed with and applied what Hope J said, to the effect that where there had not been a proper notice given under s 129 of the Conveyancing Act one did not take into account breaches of the lease, other than non-payment of rent, when considering relief against forfeiture.
There is nothing in s 129 of the Conveyancing Act 1919 which prevents the operation of a term of a lease the subject matter of which is the re-entry or forfeiture or relief in the case of non-payment of rent. Section 129(10) of the Conveyancing Act 1919 says:
(10) This section applies to leases made either before or after the commencement of this Act, and shall have effect notwithstanding any stipulation to the contrary.
However, s 129(8), which is set out above, specifically provides that s 129 does not affect the law relating to re-entry or forfeiture or relief in the case of non-payment of rent. Section 129 imposes an obligation to give notice as a pre-condition to the exercise of a right of re-entry or forfeiture under the lease, but re-entry, forfeiture and relief in the case of non-payment of rent are expressly exempted from that pre-condition by s 129(8) of the Conveyancing Act 1919. This leaves the parties to a lease free to make their own agreement with respect to notice in relation to those circumstances.
Clause 12.2.2 of the lease is not affected by s 129 of the Conveyancing Act 1919.
The finding and order made by the Tribunal at first instance that clause 12.2.4 of the Law Society Commercial Lease is contrary to s 129(10) of the Conveyancing Act 1919 will be set aside, as the issue does not arise.
The Petrazzuolos rely on clause 12.2.2 of the lease. They argue that subclauses 1, 2, 3 and 4 of clause 12.2 are alternatives, each of which stands alone, so that, under the lease, a lessor can enter and take possession of the property if the lessee has repudiated the lease (clause 12.2.1), if rent or other money due under the lease is 14 days overdue (clause 12.2.2) or if the lessee has failed to comply with a lessor's notice under s 129 of the Conveyancing Act 1919 (clause 12.2.3). Re-entry may also be effected under the lease if the lessee has not complied with any term of the lease where a lessor's notice is not required under s 129 of the Conveyancing Act 1919, and the lessor has given at least 14 days written notice of the lessor's intention to end the lease.
It was argued in Charlie Bridge's case that re-entry by the landlord into the premises for non-payment of rent required notice under clause 12.2.4, despite the terms of clause 12.2.2. Rather than characterising the subclauses of clause 12.2 as alternatives, Charlie Bridge argued that 12.2.4 is a 'catch all' in relation to breaches of the lease, including breaches which could be relied upon for the preceding subclauses. The Petrazzuolos argued that the effect of this would be that clauses 12.2.1 and clause 12.2.2 would have no work to do.
As we have said, Charlie Bridge relied upon the judgment of Santow J in MI Design, extracts of which have been reproduced above.
The Tribunal is bound by the ratio decidendi of decisions of the NSW Supreme Court.
The Petrazzuolos argued that, in Gupta v Fordham Laboratories Pty Ltd [2018] NSWSC 551, at paragraph 232, in dealing with the same basic lease, Ward CJ supported their interpretation of clause 12.2 of the lease by saying:
232. Fordahm also argues that such a result also follow by reference to cl 12.2 of the Lease (which gives a right of termination for failure to comply with a s 129 notice (cl 12.2.3) as an alternative to the right to termination for repudiation or failure to pay rent (cl 12.2.1 or co 12.2.2)).
The Petrazzuolos further argued that the MI Design case was decided on the basis of the tenant's breaches of the Liquor Act 1982, and not on the basis of the unpaid rent. It is clear from the judgment in MI Design that the rent which had been overdue had been paid prior to the matter being argued (see paragraph 3 of the judgment of Santow J). In paragraph 29 of the judgment, after setting out an extract from the letter sent by the solicitors for the landlord to the tenant upon re-entry, which set out in some detail the breaches of the Liquor Act 1982 which were relied upon as a basis for the re-entry, Santow J said:
29 While other breaches were mentioned in general terms in the letter of 16 September 2000 by reference to specific clauses but not specific conduct, it appears common ground that the breaches specifically relied upon are those described in (c) and (d) above [ie, breaches of the Liquor Act 1982]. It is contended that these are the breaches which would come within clause 23.1 of the Variation and in particular paragraph (a) thereof. The admitted breaches are those described in 11(10) and 11(12) above. No others were substantiated.
Having regard to the whole of the judgment in MI Design, it seems to us that it was decided on the basis of the landlord having re-entered the premises on the basis that the tenant was in breach of the lease on account of its breaches of the Liquor Act 1982, and not on the basis of unpaid rent. Where the judgment addresses the issue of the giving of notice on account of unpaid rent, it does so as obiter dicta.
In this matter, we have closely considered clause 12.2 of the lease. We prefer the interpretation supported by the obiter dicta in Gupta v Fordham Laboratories Pty Ltd to the interpretation argued for by Charlie Bridge.
We determine that clause 12.2.2 of the lease gives a lessor a basis upon which that lessor may enter and take possession of the property without prior notice to the tenant. In other words, we consider that clause 12.2.2 provides a basis for re-entry which is independent from clause 12.2.4. We consider that each of the subclauses of clause 12.2 is intended to operate separately from each other.
[6]
Conclusion
The Petrazzuolos were entitled, under clause 12.2.2 of the lease, to re-enter and take possession as they did on account of the unpaid rent.
The issue of whether the email of 13 September 2017 from the Petrazzuolos to Charlie Bridge constituted notice under clause 12.2.4 does not now arise, but in case we are wrong as to the operation of clause 12.2.2, we will indicate that we do not consider that the terms of that email, which simply asserted that the tenant was in breach of the lease on account of due and unpaid rent, can be reasonably interpreted as 'written notice of the lessor's intention to end this lease'.
We have decided the matter on a basis which is different from the reasons of the Tribunal at first instance, but which yields the same practical result as far as the parties are concerned. We will make the following orders:
1. The appeal is allowed to the extent necessary to set aside Order 1, and Order 1 is set aside.
2. Otherwise, the appeal is dismissed.
[7]
I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.
Registrar
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
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Decision last updated: 19 July 2019